Do I Have To Claim Income From Renting To My Mother-In-Law?

You’ve taken the plunge and renovated the basement for mom. Fortunately, she’s able to help pay for the new suite. However, now you’re worried that the monies she’s paying are going to get added to your income; or worse, you’ve put lots of money into the rental unit and you may not be able to write-off the loss.

Canada Revenue Agency (CRA) will look at the transaction and determine whether you are dealing with each other at Arm’s Length. Arm’s Length means a relationship or transaction between persons who act in their separate interests. Related persons are not considered to be dealing with each other at arm’s length. Related persons include: individuals connected by a blood relationship, marriage, common-law partnership, or adoption (legal or in fact); or a corporation and an individual, or two corporations, may also be related persons.

Unrelated persons might not be dealing with each other at arm’s length at a particular time. For example, one person is under the influence or control of the other, or the persons are considered to be acting together. Each case depends upon its own facts.